Correlation Between Qs Us and Kensington Managed

Can any of the company-specific risk be diversified away by investing in both Qs Us and Kensington Managed at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Qs Us and Kensington Managed into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Qs Small Capitalization and Kensington Managed Income, you can compare the effects of market volatilities on Qs Us and Kensington Managed and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Qs Us with a short position of Kensington Managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Qs Us and Kensington Managed.

Diversification Opportunities for Qs Us and Kensington Managed

-0.13

Correlation Coefficient

Qs Us  Kensington Managed

Good diversification

The 3 months correlation between LMBMX and Kensington is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Qs Small Capitalization and Kensington Managed Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kensington Managed Income and Qs Us is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Qs Small Capitalization are associated (or correlated) with Kensington Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kensington Managed Income has no effect on the direction of Qs Us i.e., Qs Us and Kensington Managed go up and down completely randomly.

Pair Corralation between Qs Us and Kensington Managed

Assuming the 90 days horizon Qs Small Capitalization is expected to under-perform the Kensington Managed. In addition to that, Qs Us is 6.54 times more volatile than Kensington Managed Income. It trades about -0.19 of its total potential returns per unit of risk. Kensington Managed Income is currently generating about 0.1 per unit of volatility. If you would invest  976.00  in Kensington Managed Income on December 2, 2024 and sell it today you would earn a total of  11.00  from holding Kensington Managed Income or generate 1.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Qs Small Capitalization  vs.  Kensington Managed Income

Qs Small Capitalization

Risk-Adjusted Performance

Very Weak

Over the last 90 days Qs Small Capitalization has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's primary indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Kensington Managed Income

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kensington Managed Income are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Kensington Managed is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Qs Us and Kensington Managed

The main advantage of trading using opposite Qs Us and Kensington Managed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Qs Us position performs unexpectedly, Kensington Managed can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Kensington Managed will offset losses from the drop in Kensington Managed's long position.

The idea behind Qs Small Capitalization and Kensington Managed Income pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.